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Manning Rolls Salary Into Incentives…Does It Impact the League?

I’ve talked here a good bit about Peyton Manning’s contract situation with the Broncos and their desire to ask him for a pay cut. Well yesterday Manning sort of agreed to a pay cut, taking a base salary reduction of $4 million and turning it into incentives based on playoff performance. As I said before the Broncos had little leverage to ask for a paycut and likely played on the idea that Manning did not want to chance having to play his last year or two in another uniform, but it is the incentive structure I wanted to talk about.

Manning will earn $2 million if he wins the AFC Championship game and another $2 million if he wins the Super Bowl. These were the kind of bonuses that had been common in rookie contracts many years ago, where a highly drafted QB would be further rewarded for playoff success. However, these incentives were not as common in veteran contracts, specifically in the contracts of players as accomplished as Manning.

I’ve long held firm to the belief that the NFL as a whole was a bit stunned at the prospect of Joe Flacco earning over $20 million a season, seemingly on the strength of winning a Super Bowl. That contract directly led to Matt Ryan earning even more than Flacco because from a statistical standpoint there was no comparison between the two players. Ryan was consistently throwing for well over 4,000 yards and 25 touchdowns compared to Flacco’s upper 3,000 yard years and 20 touchdown seasons.

San Francisco was next up to extend a young quarterback in Colin Kaepernick. Kaepernick had appeared in a Super Bowl and championship game in his short career. He had great potential and was also looking for a monster deal. While he received a very strong contract it was unique in that the contract contained a large number of incentives that were tied to either being named to the All Pro Team or reaching the Super Bowl again.

The contract kind of sent some shockwaves around the contract world because Kaepernick was tying his future security and earnings to high performance levels. Most said it would mean nothing, but then when Andy Dalton signed an extension with the Bengals he also tied a large number of contract dollars to playoff performance. Odd but Dalton wasn’t exactly a household performer and had failed multiple times to win in the playoffs.

The feeling was that such contracts would not impact negotiations with Cam Newton (former first overall pick), Andre Luck (former first overall pick), or Russell Wilson (Super Bowl winner). Similarly the feeling was these would have no bearing on the next wave of veteran extensions such as Eli Manning and Ben Roethlisberger and in fact they did not when Alex Smith signed a four year extension with Kansas City.

But with Manning, arguably the greatest QB of his generation, now agreeing that millions of dollars in his contract be tied to ultimate team performance people should take notice. I’m not sure that this is going to be considered an outlier structure anymore and perhaps the next wave of QB’s are going to be pushed into such contracts.

I’ve long held the belief that the QB position has become overpaid in part because of the overreliance on things like team wins or playoff wins. Maybe now this is the way teams will start to bring those numbers down in the future. I’d watch closely at the negotiations this spring and summer to see if this trend continues or if it ends with Peyton. My guess is we will soon be seeing it again.